Abstract

The Reserve Bank’s 2019 Consumer Payments Survey has provided further evidence that
Australian consumers are increasingly preferring to use electronic payment methods. Many
people now tap their cards, or sometimes phones, for small purchases rather than paying in
cash. Consumers also have an increasing range of options available for making everyday
payments. Despite this, cash still accounts for a significant share of lower-value payments
and a material proportion of the population continues to make many of their payments in
cash.

Introduction

The Bank undertook its fifth comprehensive survey of consumer payments in October and November 2019.[1] Participants
in the Consumer Payments Survey (CPS) recorded details about every transaction they made in a week and
provided extra information on their payment preferences and attitudes in a post-survey questionnaire.[2] The way in
which Australians are making payments is changing and new payment methods are emerging, often enabled by
mobile technology. Accordingly, the 2019 CPS asked participants to report more information than
previously on their use of newer electronic payment methods and channels, as well as in-depth information
on their use of and attitudes towards cash. Around 1,100 people participated in the survey,
recording around 13,500 consumer payments (see Box A: Details of the CPS).

The CPS showed that Australians are continuing to switch to electronic payment methods in preference to
cash and confirmed that personal cheques are seldom used for consumer payments (see Box B: The
Decline of Cheques). In 2019, debit cards were the most commonly used means of payment, overtaking cash
as the single most frequently used payment method (Table 1).[3] Although the share of payments made in
cash continued to fall, cash was still used for over one quarter of consumer payments and some people
continue to rely heavily on cash in their daily lives.

This article sets out the main findings of the 2019 CPS, focussing on consumers' use of cash, cards
and other electronic payment methods and channels.[4]

Sources: RBA calculations, based on data from Colmar Brunton, Ipsos and Roy Morgan Research

Cash

The 2019 CPS provided further evidence of the decline in the transactional use of cash –
27 per cent of all consumer payments were made with cash in 2019, compared with
37 per cent in 2016 and 69 per cent in 2007 (Graph 1, left panel).[5] When
measured by the value of consumer payments (rather than the number), the share of cash payments fell to
around 10 per cent, from just under 40 per cent in 2007 (Graph 1, right
panel).

While consumers in all broad demographic groups are using cash less frequently than they did in the
past, the shift to electronic payment methods has been most pronounced among younger Australians
(Graph 2, left panel). Survey respondents aged under 40 used cash for less than
15 per cent of their payments in 2019, roughly half the share reported by participants in this
age group in 2016.

Graph 1

Despite these changing payment preferences, some members of the community continue to make a material
share of their payments in cash. While participants aged 65 and over use cash less frequently than
they used to, consumers in this demographic still made over half of their payments in cash in 2019.
Lower-income households also tend to pay in cash more often than households in higher income groups
(Graph 2, right panel).

Graph 2

Among all survey participants, around 15 per cent of respondents used cash for over
80 per cent of their in-person payments in 2019 and about 10 per cent used cash for
all of their in-person transactions over the week (compared with 12½ per cent of
all respondents in 2013 and 2016) (Graph 3). At the other end of the scale, the CPS indicates that
an increasing share of Australian consumers do not use cash at all in a typical week; around a third of
consumers did not record any cash payments in the 2019 survey, compared with
18 per cent in 2016.

Graph 3

The shift away from cash has occurred for transactions of all sizes, including for lower-value payments
as consumers increasingly prefer to use contactless cards to ‘tap and go’ for these
purchases (see below). This trend continued in the latest survey, with the share of transactions of
$10 or less made in cash falling by 18 percentage points since 2016. Cards are now used more
often than cash for all payments over $5. Nonetheless, cash still accounts for a significant share of
small transactions: about 45 per cent of payments of $10 or less (Graph 4).

Graph 4

People continue to use cash for two broad reasons: personal preference and merchant acceptance. When
asked about the most important reason for paying in cash, around a third of respondents in 2019 cited
factors relating to merchant acceptance, fees and pricing (Graph 5). Some respondents also indicated
a preference for using cash for small transactions (around 20 per cent), as well as to assist
in budgeting or as a means to spend using their own (rather than borrowed) funds (around
15 per cent). Not surprisingly, respondents who used cash relatively frequently (for more than
80 per cent of their in-person payments) tended to cite factors relating to a preference for
using cash over other payment methods. For example, nearly half of frequent cash users reported that
budgeting and a preference for using their own funds were their most important reasons for using cash. In
contrast, people who used cash less often commonly cited merchant acceptance as the most important reason
they used cash, which could suggest that they paid in cash only when other payment options were
unavailable.

Graph 5

As the transactional use of cash has continued to decline, so too has the value of cash that respondents
held in their wallets or purses. The median value of such holdings was $45 in 2019, which was
$10 less than in 2013. In the 2019 survey, around a quarter of people held no cash at all in their
wallet; the equivalent figure was 8 per cent in 2013. Respondents were also asked if they held
cash outside their wallet, with nearly 40 per cent reporting that they did so. Aside from
making everyday payments, the most common reason cited for holding cash was for precautionary purposes
(Graph 6). People also cited budgeting and issues relating to the convenience and accessibility of
cash as important reasons for holding it.

Graph 6

Payment Cards

As Australian consumers pay in cash less frequently, they are often instead using cards for their
purchases. This trend continued in the latest CPS, with the share of payments made using credit and debit
cards combined increasing by around 10 percentage points between 2016 and 2019, to
63 per cent of consumer payments (Table 1).

The recent increase in the frequency of card payments relative to other payment methods has been largely
because cards are being used more often to make payments in-person at the point-of-sale.[6] While
consumers are using cards more frequently for payments of all sizes, growth in the use of cards –
particularly debit cards – was strongest for lower-value transactions (Graph 7). This ongoing
shift to cards for relatively small purchases has been facilitated by the adoption of contactless
functionality by consumers and merchants; around half of all in-person payments were made by
‘tapping’ a debit or credit card on a card terminal in 2019 (Graph 8, left panel). A
further 5 per cent of in-person payments were made by tapping or waving a smartphone or other
payment-enabled mobile device (e.g. watch) in front of a card terminal rather than using a physical
(plastic) card. Overall, 83 per cent of point-of-sale card transactions were contactless,
initiated by tapping a card or mobile device (Graph 8, right panel).

Graph 7

Graph 8

While mobile device ‘tap and go’ payments still account for a relatively small share of
consumer payments, the use of mobile payments has grown over the past three years. In 2019, around
10 per cent of respondents made at least one mobile payment during the week of the survey,
which is over twice the share of respondents that made at least one such payment in 2016.[7] The adoption
of mobile payments is consistent with the increased availability of this payment option and with
consumers' greater awareness of the ability to make mobile payments. At the time of the 2016 survey,
the ability to make mobile payments was still a relatively new feature of the retail payment system
whereas it is now a more common product offering across card issuers. The growth in contactless mobile
device payments has been driven by increased use among consumers aged under 40; almost one in five people
in this age group recorded at least one contactless mobile payment during the week of the 2019 survey
(Graph 9).

Graph 9

Cards are being used more frequently at all broad types of businesses, including in sectors where cash
has traditionally been used for a high share of transactions. For example, participants in the 2019 CPS
used cards for around 60 per cent of purchases at (non-supermarket) food retailers –
which includes small food stores, cafes, restaurants and pubs/bars – displacing cash as the most
common means of payment at these businesses for the first time.[8]

When choosing to pay with a card, Australian consumers are increasingly using debit cards – which
allow people to make payments from funds in their deposit account – rather than credit cards.
Debit cards were used for nearly 45 per cent of consumer payments (by number) in 2019, an
increase of around 15 percentage points from three years earlier. Credit cards accounted for
19 per cent of consumer payments in 2019, which was a slightly lower share than in the 2016
survey (Table 1).[9]

The use of debit cards grew among survey participants of all ages between 2016 and 2019, although
younger people tend to use debit cards the most intensively; respondents aged under 40 made around
two thirds of their in-person payments with a debit card, compared with 36 per cent for
consumers in older age groups (Graph 10). Debit cards are also becoming an increasingly popular way
of making online purchases, accounting for around 30 per cent of these payments in 2019,
compared with 23 per cent in 2016 (see below).

Graph 10

Online Payments

A long-run trend in retail payments is an increase in the share of transactions that occur online rather
than in-person, consistent with growth in e-commerce. As in previous surveys, participants in the 2019
CPS were asked to record the details of every consumer payment that they initiated online during the week
of the survey.

Around 55 per cent of respondents made at least one online payment in 2019, which was about
the same as in 2016 but double the share of people surveyed in 2007. When measured by the number of
transactions, the share of payments made online was 13 per cent, which was a similar share as
in the previous two surveys but roughly four times the online share recorded in 2007 (Table 2). It
has become increasingly common for these payments to be made using mobile apps, with
40 per cent of online payments initiated through apps rather than ‘traditional’
web browsers (e.g. Chrome or Safari) in 2019.

Many respondents also reported that they had used debit or credit card details that had previously been
stored on a computer, device or within an app to make an online payment (as opposed to filling in their
card details at the checkout stage of the transaction). This includes, among other things, choosing to
auto fill stored payment credentials when shopping online, and payments made via apps in which the
payment is embedded and occurs in the background at the time of a transaction (e.g. transport
ride-sharing apps). Around 45 per cent of survey participants had used stored payment details
for an online payment in the past year. This is consistent with a trend towards payments becoming more
seamless from the perspective of consumers.

Sources: RBA calculations based on data from Colmar Brunton, Ipsos and Roy Morgan Research

While the online share of payments shown in Table 2 has been fairly stable in recent years, these
figures do not include participants' automatic payment arrangements, such as household bills (e.g.
electricity or subscription services) paid by direct debit, and recurring ‘pay anyone’
transactions via online banking. These arrangements are set up ahead of the payment occurring and are
recorded separately in a post-diary questionnaire. This allows participants to review their bank
statements when recording information on these payments. The share of total weekly spending made
automatically – rather than initiated during the week of the CPS – has been steadily
increasing over recent years, to 9 per cent of the number of total transactions (Graph 11,
left panel). When measured by the value of weekly spending, around one fifth of all payments were made
automatically in 2019 (Graph 11, right panel). The growth in automatic payments largely reflects the
changing way people pay their bills and, to a lesser extent, make debt repayments. Around half of all
household bill payments in 2019 were made automatically, which is more than double the share in 2013.
This shift towards automatic payments for certain transactions is another way in which payments are
becoming more seamless.

Graph 11

New Payment Methods

The way in which Australian consumers make payments is being shaped by a number of related influences.
Among other things, these include the emergence of different payment channels, the use of mobile
technology and the introduction of innovative products and services.[10]

Over the past few years, a number of alternative means of payment have emerged or attracted greater
attention. These include (among others): buy now, pay later (BNPL) services that enable consumers to
obtain goods and services immediately and make subsequent payments in a series of interest-free
instalments; the ability to make in-app payments using stored card details;
‘cryptocurrencies’; and the ability to make real-time account-to-account bank transfers
using PayIDs via the New Payments Platform. To gauge awareness and use of these methods, the CPS asked
respondents whether they had heard of a number of ‘alternative’ ways of making payments and
also whether they had used them at least once in the past 12 months (Graph 12).

In terms of awareness, a majority of respondents had heard of several of the newer means of payment,
with awareness highest for BNPL services and the ability to make tap and go payments using devices such
as mobile phones and various types of ‘wearables’. Although many respondents had heard of
‘cryptocurrencies’, very few had used a cryptocurrency such as Bitcoin to actually make a
consumer payment over the past year (indeed, less than one per cent had done so). In contrast,
around one third of consumers reported that they had made an in-app mobile payment, with tap-and-go
mobile device payments and BNPL the next most frequently used ‘alternative’ payment
methods. While consumers have a broader range of options with which to make their payments, it is worth
noting that many of these newer services ultimately use existing card networks to facilitate the payment
(e.g. via stored card details).

Graph 12

Conclusion

The way in which Australian consumers make their everyday payments is continuing to change. The
Bank's 2019 CPS showed a continuation of the trend decline in the use of cash for consumer payments
as many people now prefer to use electronic payment methods, such as cards, for even small purchases. The
majority of in-person payments are now initiated by tapping a card with contactless functionality on a
terminal, and consumers are also using mobile phones and other devices to make ‘tap and go’
payments more often than they were three years ago. People are also making more of their online payments
using mobile devices and using stored payment credentials.

The growing importance of electronic payments highlights the need to make sure that electronic payments
are low-cost, secure and resilient to operational disruptions. In this regard, the Bank is conducting a
review of retail payments regulation in 2020 which will consider a range of issues relating to
competition, efficiency and the safety of retail payments.[11] The CPS is an important source of information on a
number of aspects of this review.

The CPS is also one of the main sources of information on the use of cash and cheques in the economy.
While cash is used less frequently than in the past, it is still widely held for precautionary purposes
and some members of the community continue to rely very heavily on it in their daily lives. Older
Australians, for example, continue to make a significant share of their payments in cash, although survey
participants in this demographic are also making increasing use of electronic payment methods over time.
It will be important to consider the needs of people who prefer to pay in cash or continue to write
cheques, and/or who do not have access to electronic payment options in the broader transition to
electronic payments.

Box A: Details of the Survey

The fieldwork for the 2019 Consumer Payments Survey was conducted by the research firm Roy Morgan
Research on behalf of the Bank in October and November 2019. The survey consisted of three parts: a
pre-diary questionnaire about the demographic characteristics of respondents; a seven-day payments diary;
and a post-survey questionnaire focussing on respondents' payment preferences and attitudes. To
encourage participation and engagement with the survey, respondents received a gift card on completion of
the three components.

The survey was delivered online for most respondents but to ensure the sample was broadly representative
of the Australian population, participants without internet access were recruited by telephone to
complete a paper-based survey. The overall response rate was good, resulting in a final sample of just
over 1,100 respondents. These participants made a total of around 13,500 consumer payments and
around 1,500 automatic payments in their seven-day diary periods.

In addition to internet access, recruitment targets for age, sex, household income, credit card
ownership and location (i.e. capital city or regional area) were set so that the sample would be
reasonably representative of the Australian population. To account for different response rates across
the various demographic categories, the Bank weighted the responses so that the final sample aligned with
Australian Bureau of Statistics and HILDA population benchmarks.[12]

Box B: The Decline of Cheques

The 2019 Consumer Payments Survey provided further evidence of the long-term decline in the cheque
system, with personal cheques seldom used for consumer payments. Cheques accounted for only
0.2 per cent of the payments made during the week of the survey, a similar rate to that
recorded in 2016. As in previous surveys, cheque use was concentrated among older Australians; all of the
cheque payments made in the 2019 survey were made by respondents over 50, with 80 per cent of
these made by those aged over 65. Personal cheques were often used for relatively large consumer
expenditures such as household bills and services.

Because cheques are used so infrequently, it will be appropriate at some point to wind up the cheque
system.[13] In this context, it is important that alternative payment methods are available and
accessible for those who rely on cheques. For people who continue to use cheques, the majority indicated
that this reflected a preference to use cheques for some payments, although smaller shares reported that
they had no access to an alternative means of payment or that the receiver only took cheques
(Graph B1).

Graph B1

Footnotes

James Caddy, Luc Delaney and Chay Fisher are from
Payments Policy Department; Clare Noone is from International Department, having worked on the survey
when she was in Payments Policy Department. Cameron Dark and Ed Tellez from Payments Policy Department
also made significant contributions to the survey. [*]

The Bank has conducted Consumer Payments Surveys
every three years since 2007. For information on previous surveys see Emery, West and Massey (2008);
Bagnall, Chong and Smith (2011); Ossolinski, Lam and Emery (2014); Doyle, Fisher, Tellez and Yadav
(2017a and 2017b). [1]

In the 2016 CPS, debit and credit cards combined
were used more frequently than cash. [3]

A detailed report and additional data will be
published later in 2020. [4]

For previous discussions of the use of cash in the
economy see, for example, Davies, Doyle, Fisher and Nightingale (2016) and Meredith, Kenney and Hatzvi
(2014). [5]

As discussed below, the share of online payments was
stable in 2019 and cards were used for a similar proportion of these payments as in the 2016 survey. [6]

People who had made one or more contactless mobile
device payments over the week of the survey made 45 per cent of their in-person payments
using this method. [7]

In 2007, cash was used for almost
90 per cent of purchases at (non-supermarket) food retailers. [8]

Growth in the use of debit cards relative to credit
cards is consistent with aggregate data from the Bank's Retail Payments Statistics, which show
that growth in debit card transactions has outpaced that in credit cards since the mid 2000s. [9]

This paper uses unit record data from the
Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and
is funded by the Australian Government Department of Social Services (DSS) and is managed by the
Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and
views reported in this paper, however, are those of the author and should not be attributed to either
DSS or the Melbourne Institute. [12]